Issue #13: The Cross-Border Blueprint

I think the most common phrase I’ve said related to Mexico is “cross-border freight is complicated,” and I mean it. I can’t help it, most shippers and brokers find it to be a black hole.

Cross-Border Freight is Complicated

Cross-border freight is complicated. You’ve heard me say this before and I’ll keep saying it. It’s not just a matter of finding a Spanish-speaker in your office and having them schedule your appointments in Mexico. You need people who know what they’re doing in every aspect of a cross-border solution.

In case you missed it, Mexico officially took over as the top trading partner to the United States, surpassing China. This is the result of a few key events that I’ve covered previously in Issue #2: Nearshoring is Booming:

• NAFTA was replaced with the USMCA, which encouraged even more manufacturing to happen in North America (read: Mexico) than in Asia.

• The Pandemic caused manufacturers, retailers, and distributors to rethink their reliance on China for production, shifting their reliance to Mexico, a friendlier and closer country.

• The Trade War with China has been the latest straw, providing yet another reason for companies to rethink their supply chains. Trade tariffs on Chinese imports, coupled with the CHIPS act, have made it a lot more logical to rely on manufacturing in Mexico.

Mexico is much easier to get to for leadership at HQ in the United States, it’s in similar time zones, there are more people in the U.S. who speak Spanish than Mandarin, and there’s stronger cultural alignment between the U.S. and Mexico than the U.S. and China. Between all those reasons and the fact that it’s a drastically shorter transit time from Mexico to the United States than from China, we’re primed to see a serious growth in manufacturing and production in Mexico, resulting in a serious need for improved infrastructure and solutions for our North American supply chain.

Logistics companies are one category of the solutions involved in supporting North American supply chains for manufacturers, retailers, and distributors. Historically, Mexico was an afterthought for the leaders of most transportation departments. 3PLs and freight brokerages have long focused on supporting those companies’ domestic networks, with only a few supporting their cross-border needs. With all the focus on nearshoring, more companies than ever are expanding their service offering to the southern border, or have a serious desire to do so.

I’ve heard from a ton of these companies who are attempting to expand into Mexico and so I thought I would share some guidance around this type of expansion.

Expanding to Mexico

When I first launched the Mexico department at Coyote, as I told the story in Issue #6: How I got my start in Mexico, it was pure luck that I had found a carrier who could service Mexico. It wasn’t intentional until we started digging and found out that most of our domestic customers had cross-border freight. It just required someone to spearhead the growth efforts, people to support the operations, and a team to onboard carriers. It’s that simple, right?

There isn’t a simple formula. Yes, there are some key roles you need to fill, but it takes a whole lot more than a resident Mexico expert to build a world class cross-border service offering. It requires a company-wide collaborative desire to build the service, it takes cultural understanding, and it takes focus in the key three areas: people, process, and technology.

Cultural Understanding

Nearly twenty percent of people in the United States are of Latino or Hispanic origin, but it doesn’t mean you’ll find that same split at a logistics company. And while the United States and Mexico share a border that’s 1,954 miles long, the two countries are very different. The cost of living is drastically different, there’s two different languages, and two different cultures. What works in the U.S. doesn’t always work in Mexico, especially when it comes to performance management and in-office culture. Strong work ethics can be found on both sides of the border but it shows in different ways.

People

Building a cross-border business takes subject matter experts who can lead. Your SMEs will collaborate internally with sales and operations people, externally with customers, and will likely spearhead opportunities that stretch well beyond a typical domestic bid. There are all sorts of unique requirements that go with cross-border freight that can make or break the success of a lane. You need people who understand and can translate those requirements, both figuratively and literally, to the operations team and carrier sales team.

Your operations team typically works with both your facilities in Mexico and your customer’s customs brokers, coordinating and sharing paperwork between all the relevant parties. There’s so much complexity to this whole process, it’s not something you can just throw a Spanish-speaker at and have it solved. You need expert leaders who can establish the right process and roll it out across their teams.

Process

Speaking of establishing the right process, process is one of the most important parts to moving cross-border freight for any shipper. It’s rare not to have an onboarding call with a customer and all the related parties to get everyone on the same page and map out some required protocols. While you may find there to be some similarities from one customer to another, there are a lot of moving pieces that can complicate things.

It’s critical to define a process for how the team collects and shares information, how they communicate with customs brokers and facilities in Mexico, and how they collaborate with carriers moving the freight. The operations team is the glue of the whole service offering. Execution is everything. It’s also critical to design the right go-to-market motion and coverage strategy that aligns with the execution.

Technology

Most Transportation Management Systems (TMS) aren’t built to support Mexico. Whether it’s the city data or the details at the border, the systems weren’t built with Mexico in mind. Little technology built for brokers, shippers, and carriers is built to support the full North American continent. There are some systems out there that support various aspects of cross-border movements, but most don’t in a clean way.

It takes a lot of time, expertise, and patience to get your systems in a place to support cross-border freight but it’s also not abnormal, today, to operate across spreadsheets, WhatsApp, and email extensively. It’s the way this business has worked so far and it’s how it works today.

How do you get started?

I would start by getting a leader in place who understands how cross-border freight works, particularly with respect to operations at the border. It’s so critical to nail – the last thing you want to do is take your first Mexico load from a critical domestic customer and then end up with egg on your face when a load gets stuck at the border for two weeks, potentially risking losing the account due to that one load.

There’s a growing amount of brokerages who are supporting Mexico freight but it boils down to expertise, execution, and a leveraged carrier network that can support the business. Some are doing it through organic growth by a combination of hiring and training, while others have been acquiring specialized companies to accelerate that growth.

We’re also building technology that will help with some of these issues and are excited to launch the first full product soon. We have already started onboarding some users to perform some basic actions but will start to see that impact in the near future. I’ll repeat two things, we’re not building a brokerage and we’re not building a TMS.

Sign up for the waitlist at Cargado.com.